Exhibit 99.1
GRANITE CONSTRUCTION INCORPORATED REPORTS FOURTH QUARTER AND
FULL YEAR 2006 RESULTS
- Total Company FY06 revenue a record $2.96 billion
- Branch Division posts record FY06 operating income of $264.5 million
- Branch Division backlog up 11% year over year
- Heavy Construction Division reports operating loss in the quarter of
$76.5 million
- Heavy Construction Division operating loss includes $18.0 million
goodwill write-down
- Heavy Construction Division backlog down 10% year over year
WATSONVILLE, Calif., Feb. 14 /PRNewswire-FirstCall/ -- Granite Construction
Incorporated (NYSE: GVA) today announced financial results for the fourth
quarter and full year ended December 31, 2006. Revenue for the quarter totaled
$715.2 million compared with $679.6 million for the fourth quarter ended
December 31, 2005. Revenue for the year totaled $2.96 billion compared with
$2.64 billion in 2005.
The Company reported net income for the quarter of $0.6 million, or $0.02
per diluted share, including $18.0 million for a write down of goodwill related
to the Heavy Construction Division's Granite Northeast operation. On a pro forma
non-GAAP basis, excluding this goodwill charge and the related tax benefits, net
income for the fourth quarter 2006 was $11.6 million, or $0.28 per diluted
share, compared with $35.8 million, or $0.86 per diluted share for the same
period last year. Pro forma non-GAAP net income for fiscal year 2006 was $89.2
million, or $2.15 per diluted share, compared with $83.2 million, or $2.02 per
diluted share in the prior year.
The following table reconciles GAAP net income to net income on a pro forma
non-GAAP basis (in thousands):
Three months ended Years ended
December 31, December 31,
----------------------- -----------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
GAAP net income $ 628 $ 35,812 $ 78,220 $ 83,150
Goodwill impairment charge 18,011 -- 18,011 --
Tax benefit of goodwill
impairment charge (7,006) -- (7,006) --
Non-GAAP net income $ 11,633 $ 35,812 $ 89,225 $ 83,150
Non-GAAP diluted
earnings per share 0.28 0.86 2.15 2.02
"I am very pleased to report that 2006 was another record-breaking year for
the Branch Division," said William G. Dorey, President and Chief Executive
Officer. "I am extremely proud of what our team was able to accomplish this year
in both our construction and aggregate materials businesses. Thanks to mild
weather in the West, we were able to work late into the season and have a strong
finish to the year. More importantly, we are successfully capitalizing on what
we consider to be one of the best construction markets in our history."
"Unfortunately, our fourth quarter and full-year 2006 financial results for
HCD were considerably below our expectations. As outlined in our operational
realignment announcement made today, we are implementing key strategic changes
in our operating structure that will allow us to more effectively and profitably
manage our large, complex projects. We are committed to doubling our efforts in
all aspects of this business so that we can successfully capture the profit
potential on this work."
He added, "As our financial results reflect, we are writing down the $18.0
million of goodwill from the 2001 acquisition of Halmar Builders of New York,
Inc. While our performance to date does not support our original investment, we
remain confident in our new management team and believe that the New York market
will continue to present profitable opportunities for us going forward."
Operating Results -- Quarter and Year-To-Date
Total gross profit as a percent of revenue for the fourth quarter 2006
decreased to 7.2% compared with 15.6% for the same period last year.
Other income for the quarter ended December 31, 2006 was positively impacted
primarily by interest income which increased $2.6 million to $7.4 million as a
result of higher average yield on a higher level of interest- bearing
investments.
Total gross profit as a percent of revenue for the year ended December 31,
2006 decreased to 9.8% compared with 12.1% last year. Operating income for the
year decreased to $83.3 million compared with $134.9 million for the same period
in 2005. Total company backlog at December 31, 2006 was essentially flat at $2.3
billion.
Results by Segment
Branch Division revenue for the quarter totaled $472.3 million, an increase
of $70.4 million or 18% over the same period in 2005. Backlog for the Branch
Division increased to $807.6 million compared with $728.3 million for the fourth
quarter 2005. Gross profit as a percent of revenue increased for the fourth
quarter 2006 to 21.6% compared with 19.1% for the fourth quarter 2005 due to
record levels of profitability on our construction work and the sales of our
construction materials. Branch Division operating income increased $27.5 million
for the quarter to a record $79.4 million compared with $51.8 million for the
fourth quarter last year. The increase includes approximately $4.8 million for
the partial reversal of a previously recorded legal provision related to
settlement of a civil lawsuit in Nevada.
For the year ended December 31, 2006, Branch Division revenue totaled $1.8
billion compared with $1.6 billion for the same period last year. Gross profit
as a percent of revenue for the year ended December 31, 2006 increased to 19.7%
compared with 16.0% last year. Operating income for the division increased to a
record $264.5 million for the same period compared with $153.7 million in 2005.
HCD revenue for the quarter totaled $242.6 million versus $260.7 million for
the same period last year. HCD backlog decreased to $1.4 billion compared with
$1.6 billion as of year end 2005. Gross margin as a percent of revenue was a
loss of 21.0% compared with a profit of 6.8% in the prior period. This decrease
reflects a net reduction in gross profit of approximately $70.0 million
resulting from changes in estimates of project profitability compared with a net
increase of $1.5 million from such changes in the fourth quarter last year.
Largely as a product of these estimate changes in the fourth quarter 2006,
operating loss for HCD totaled $76.5 million compared with operating income of
$4.3 million for the same period in 2005.
The two largest downward forecast adjustments affecting the fourth quarter
were on the State Route 22 Design-Build project in Southern California and the
US-20 Design-Build project in Oregon. The Company believes it has strong
contractual support for additional revenue on both projects and is hopeful that
it will recover these costs through negotiations with the owners. However, there
is no guarantee of recovery and no additional revenue recognition is reflected
in our financial results.
For the year ended December 31, 2006, HCD revenue totaled $1.1 billion
compared with $1.0 billion for the same period last year. Gross margin as a
percent of revenue for the year ended December 31, 2006 was a loss of 8.5%
compared with a profit of 4.9% last year. Operating loss for HCD totaled $142.6
million in 2006 compared with operating income of $12.5 million in 2005.
Business Outlook
The outlook for the Branch Division in 2007 is extremely positive. Driven by
healthy funding levels and strong local economies, the branches continue to
experience one of the best public sector construction markets they have
witnessed in many years. Pricing for construction materials is expected to be
healthy in 2007 as demand for aggregates from both the public and private sector
remains strong.
The Company is currently forecasting HCD to break even in 2007 followed by a
return to acceptable operating margins as the existing backlog is worked off and
the benefits of the organizational realignment are realized.
Financial Results
The financial information in this announcement reflects the Company's
preliminary results subject to completion of the annual audit. Audited financial
results will appear in Granite's Form 10-K, which will be filed on or before
March 1, 2007.
Use of Non-GAAP Financials
In addition, to supplement the GAAP financial information, we have provided
non-GAAP net income and earnings per share information that exclude the $18.0
million ($11.0 million net of tax) non-cash write down of goodwill. The goodwill
impairment was primarily due to our recent reevaluation of our strategy in New
York, which was largely driven by continuing losses. We are providing this
information because we believe doing so provides a more meaningful and
consistent comparison of our ongoing operating results compared with historical
results. A table reconciling the GAAP financial information to non-GAAP
information is included in today's release.
Conference Call
Granite will conduct a conference call today at 2:30 p.m. PT/ 5:30 p.m. ET
to discuss its financial results and organizational realignment. The conference
call will be webcast live and can be accessed at
http://www.graniteconstruction.com/investor-relations. The live conference call
may also be accessed by calling (877) 864-2735 in the U.S. and Canada and (706)
634-7039 for international listeners. A replay will be available approximately
two hours after the live call through Friday, March 2nd by calling (800)
642-1687 or (706) 645-9291. The conference ID for both the live call and the
replay is 6555946.
Company Description
Granite, a member of the S&P 400 Midcap Index, the Domini 400 Social Index
and the Russell 2000, is one of the nation's largest diversified heavy civil
contractors and construction materials producers. Granite Construction serves
public and private sector clients through its offices nationwide. For the 4th
straight year, Granite was named to FORTUNE'S List of 100 Best Companies to Work
For. For more information about the company, please visit their website at
www.graniteconstruction.com.
This press release contains forward-looking statements, within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, which represents our management's
beliefs and assumptions concerning future events such as statements related to
the existence of bidding opportunities and economic conditions on the Company's
future results. Additionally, forward-looking statements include statements that
can be identified by the use of forward- looking terminology such as "believes,"
"expects," "appears," "may," "will," "should," "look for," or "anticipates," or
the negative thereof or comparable terminology, or by discussions of strategy.
All such forward-looking statements are subject to risks and uncertainties that
could cause actual results of operations and financial condition and other
events, as well as the timing thereof, to differ materially from those expressed
or implied in such forward-looking statements. Specific risk factors include,
without limitation, changes in the composition of applicable federal and state
legislation appropriation committees; federal and state appropriation changes
for infrastructure spending; the general state of the economy; job productivity;
accuracy of project estimates; weather conditions; competition and pricing
pressures; and state referendums and initiatives. You should not place undue
reliance on these forward-looking statements, which speak only as of the date of
this news release. You should also understand that many important factors in
addition to those discussed, referred to or incorporated by reference in this
press release, could cause our results to differ materially from those expressed
in the forward-looking statements. In light of these risks and uncertainties, it
is important to be aware that the forward-looking events discussed in this
release may not occur. We undertake no obligation to revise or update publicly
any forward-looking statements to conform the statement to actual results or
changes in the Company's expectations.
For further information regarding risks and uncertainties associated with
Granite's business, please refer to the "Management's Discussion and Analysis of
Financial Condition and Results of Operation" and "Risk Factors" sections of
Granite's SEC filings, including, but not limited to, its annual report on Form
10-K and quarterly reports on Form 10-Q, copies of which may be obtained by
contacting Granite's investor relations department at (831) 724-1011 or at
Granite's website at http://www.graniteconstruction.com.
GRANITE CONSTRUCTION INCORPORATED
COMPARATIVE FINANCIAL SUMMARY
(Unaudited - In Thousands, Except Per Share Data)
THREE MONTHS ENDED
DECEMBER 31, VARIANCE
---------------------------- ----------------------------
OPERATIONS 2006 2005 AMOUNT PERCENT
- ------------------------------------------------- ------------ ------------ ------------ ------------
Revenue
Construction $ 608,624 $ 583,831 $ 24,793 4.2
Material sales $ 106,603 $ 95,721 $ 10,882 11.4
------------ ------------ ------------ ------------
Total revenue $ 715,227 $ 679,552 $ 35,675 5.2
------------ ------------ ------------ ------------
Cost of revenue
Construction $ 581,661 $ 501,690 $ (79,971) (15.9)
Material sales $ 82,423 $ 71,838 $ (10,585) (14.7)
------------ ------------ ------------ ------------
Total cost of revenue $ 664,084 $ 573,528 $ (90,556) (15.8)
------------ ------------ ------------ ------------
Gross profit $ 51,143 $ 106,024 $ (54,881) (51.8)
Gross profit as a percent of revenue 7.2% 15.6% (8.4)% -
General and administrative expenses $ 48,530 $ 53,767 $ 5,237 9.7
G&A expenses as a percent of revenue 6.8% 7.9% 1.1% -
Provision for legal judgment $ (4,800) - $ 4,800 -
Impairment of goodwill $ 18,011 - $ (18,011) -
Gain on sales of property and equipment $ 891 $ 3,579 $ (2,688) (75.1)
------------ ------------ ------------ ------------
Other income (expense)
Interest income $ 7,380 $ 4,753 $ 2,627 55.3
Interest expense $ (387) $ (1,531) $ 1,144 74.7
Equity in income of affiliates $ 636 $ 1,489 $ (853) (57.3)
Other, net $ (96) $ 1,806 $ (1,902) ****
------------ ------------ ------------ ------------
Total other income $ 7,533 $ 6,517 $ 1,016 15.6
------------ ------------ ------------ ------------
Income (loss) before provision for (benefit from)
income taxes and minority interest $ (2,174) $ 62,353 $ (64,527) ****
Minority interest $ 951 $ (8,447) $ 9,398 ****
Net income $ 628 $ 35,812 $ (35,184) (98.2)
============ ============ ============ ============
Net income per share:
Basic $ 0.02 $ 0.88 $ (0.86) (97.7)
Diluted $ 0.02 $ 0.86 $ (0.84) (97.7)
Weighted average shares of common stock:
Basic 40,935 40,676 259 0.6
Diluted 41,581 41,417 164 0.4
YEAR ENDED
DECEMBER 31, VARIANCE
---------------------------- ----------------------------
OPERATIONS 2006 2005 AMOUNT PERCENT
- ------------------------------------------------- ------------ ------------ ------------ ------------
Revenue
Construction $ 2,554,745 $ 2,307,062 $ 247,683 10.7
Material sales $ 410,159 $ 334,290 $ 75,869 22.7
------------ ------------ ------------ ------------
Total revenue $ 2,964,904 $ 2,641,352 $ 323,552 12.2
------------ ------------ ------------ ------------
Cost of revenue
Construction $ 2,361,155 $ 2,060,680 $ (300,475) (14.6)
Material sales $ 313,329 $ 261,300 $ (52,029) (19.9)
------------ ------------ ------------ ------------
Total cost of revenue $ 2,674,484 $ 2,321,980 $ (352,504) (15.2)
------------ ------------ ------------ ------------
Gross profit $ 290,420 $ 319,372 $ (28,952) (9.1)
Gross profit as a percent of revenue 9.8% 12.1% (2.3)% -
General and administrative expenses $ 204,281 $ 183,392 $ (20,889) (11.4)
G&A expenses as a percent of revenue 6.9% 6.9% - -
Provision for legal judgment $ (4,800) $ 9,300 $ 14,100 ****
Impairment of goodwill $ 18,011 - $ (18,011) -
Gain on sales of property and equipment $ 10,408 $ 8,235 $ 2,173 26.4
------------ ------------ ------------ ------------
Other income (expense)
Interest income $ 24,112 $ 11,573 $ 12,539 ****
Interest expense $ (4,492) $ (6,932) $ 2,440 35.2
Equity in income of affiliates $ 2,157 $ 1,497 $ 660 44.1
Other, net $ 2,604 $ 1,258 $ 1,346 ****
------------ ------------ ------------ ------------
Total other income $ 24,381 $ 7,396 $ 16,985 ****
------------ ------------ ------------ ------------
Income (loss) before provision for (benefit from)
income taxes and minority interest $ 107,717 $ 142,311 $ (34,594) (24.3)
Minority interest $ 7,720 $ (17,748) $ 25,468 ****
Net income $ 78,220 $ 83,150 $ (4,930) (5.9)
============ ============ ============ ============
Net income per share:
Basic $ 1.91 $ 2.05 $ (0.14) (6.8)
Diluted $ 1.89 $ 2.02 $ (0.13) (6.4)
Weighted average shares of common stock:
Basic 40,874 40,614 260 0.6
Diluted 41,471 41,249 222 0.5
**** Represents percentages greater than 100%
GRANITE CONSTRUCTION INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - In thousands, except share and per share data)
DECEMBER 31, DECEMBER 31,
2006 2005
------------ ------------
ASSETS
Current assets
Cash and cash equivalents $ 204,893 $ 199,881
Short-term marketable securities 141,037 68,540
Accounts receivable, net 492,229 476,453
Costs and estimated earnings in excess of billings 15,797 43,660
Inventories 41,529 33,161
Real estate held for sale 55,888 46,889
Deferred income taxes 38,237 22,996
Equity in construction joint ventures 31,912 27,408
Other current assets 63,144 57,960
------------ ------------
Total current assets 1,084,666 976,948
------------ ------------
Property and equipment, net 429,966 397,111
------------ ------------
Long-term marketable securities 48,948 32,960
------------ ------------
Investment in affiliates 21,471 15,855
------------ ------------
Other assets 50,798 49,356
------------ ------------
Total assets $ 1,635,849 $ 1,472,230
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 28,660 $ 26,888
Accounts payable 257,612 232,807
Billings in excess of costs and estimated earnings 292,543 208,883
Accrued expenses and other current liabilities 189,928 140,569
------------ ------------
Total current liabilities 768,743 609,147
------------ ------------
Long-term debt 78,576 124,415
------------ ------------
Other long-term liabilities 58,419 46,556
------------ ------------
Deferred income taxes 22,324 37,325
------------ ------------
Minority interest in consolidated subsidiaries 15,532 33,227
------------ ------------
Shareholders' equity
Preferred stock, $0.01 par value, authorized
3,000,000 shares; none outstanding - -
Common stock, $0.01 par value, authorized 150,000,000
shares in 2006 and 100,000,000 shares in 2005;
issued and outstanding 41,833,559 shares in
2006 and 41,682,010 shares in 2005 418 417
Additional paid-in capital 78,620 80,619
Retained earnings 610,586 549,101
Accumulated other comprehensive income 2,631 1,602
Unearned compensation - (10,179)
------------ ------------
Total shareholders' equity 692,255 621,560
------------ ------------
Total liabilities and shareholders' equity $ 1,635,849 $ 1,472,230
============ ============
DECEMBER 31, DECEMBER 31,
FINANCIAL POSITION 2006 2005
- ---------------------------------------------------------- ------------ ------------
Working capital $ 315,923 $ 367,801
Current ratio 1.41 1.60
Debt to total capitalization 0.13 0.20
Total liabilities to equity ratio 1.36 1.37
GRANITE CONSTRUCTION INCORPORATED
REVENUE AND BACKLOG ANALYSIS
(Unaudited - Dollars In Thousands)
BY MARKET SECTOR
REVENUE BACKLOG
------------------------------------------------------ ------------------------------------------------------
YEAR ENDED DECEMBER 31, VARIANCE DECEMBER 31, VARIANCE
-------------------------- -------------------------- -------------------------- --------------------------
2006 2005 AMOUNT PERCENT 2006 2005 AMOUNT PERCENT
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Public Sector $ 2,021,301 $ 1,808,026 $ 213,275 11.8 $ 2,066,950 $ 2,083,824 $ (16,874) (0.8)
Private Sector 533,444 499,036 34,408 6.9 189,037 247,716 (58,679) (23.7)
Aggregate sales 410,159 334,290 75,869 22.7 - - - -
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 2,964,904 $ 2,641,352 $ 323,552 12.2 $ 2,255,987 $ 2,331,540 $ (75,553) (3.2)
============ ============ ============ ============ ============ ============ ============ ============
BY GEOGRAPHIC AREA
REVENUE BACKLOG
------------------------------------------------------ ------------------------------------------------------
YEAR ENDED DECEMBER 31, VARIANCE DECEMBER 31, VARIANCE
-------------------------- -------------------------- -------------------------- --------------------------
2006 2005 AMOUNT PERCENT 2006 2005 AMOUNT PERCENT
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
California $ 1,294,323 $ 1,028,041 $ 266,282 25.9 $ 559,169 $ 598,914 $ (39,745) (6.6)
West (Excl. CA) 866,092 788,682 77,410 9.8 516,614 585,269 (68,655) (11.7)
Midwest 58,726 92,931 (34,205) (36.8) 443,909 76,464 367,445 ****
Northeast 281,552 324,477 (42,925) (13.2) 248,605 491,944 (243,339) (49.5)
Southeast 244,233 176,088 68,145 38.7 272,881 224,549 48,332 21.5
South 219,978 231,133 (11,155) (4.8) 214,809 354,400 (139,591) (39.4)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 2,964,904 $ 2,641,352 $ 323,552 12.2 $ 2,255,987 $ 2,331,540 $ (75,553) (3.2)
============ ============ ============ ============ ============ ============ ============ ============
**** Represents percentages greater than 100%
SOURCE Granite Construction Incorporated
-0- 02/14/2007
/CONTACT: Jacque Underdown, +1-831-761-4741/
/Web site: http://www.graniteconstruction.com/
(GVA)